5606 MANUFACTURING OPERATION MANAGEMENT

MRP
Lecturer:
Associate Professor Dr. Faieza Binti Abdul Aziz
GROUP 6
N
O.

NAME

MATRIC NO.

1
2
3
4

Sarah Kanaan Hamzah

Ahmed Faisal Ahmed
Amin Shafanejad
Hussein Kadhim Sharaf

GS44687
GS46019
GS46236
GS45602

SARAH KANAAN HAMZAH

Independent and Dependent Demand Inventories

Independent Demand
It refers to the demand of finished goods, which are ordered by
External Customers or manufactured for stock and sale.
Independent demands for inventories are based on confirmed
Customer orders, forecasts, estimates and past historical data.
Dependent demand
It refers to the demand for items that are subassemblies or
component parts to be used in the production of finished goods. The
amount of dependent demand is the function of the amount of
independent demand

For example, the parts and materials that go into the production of an automobile are examples of
dependent demand, because the total amount of parts and raw materials needed during any time
period is a function of the number of cars that will be produced. Conversely, demand for the
finished cars is independent. A car is not a component of another item

Material Requirement
Planning (MRP)
It is a production planning process that starts from the demand for
finished products and plans the production step by step of
subassemblies and parts
It is also a set of techniques that takes the Master Production
Schedule and other information from inventory records and
product structure records as inputs to determine requirements and
schedule of timing for each item.

Where is MRP Applicable?

This inventory management system is appropriate for items
that have a dependent demand.
MRP is applicable for industries that offer variety of finished
products where the customer is allowed to choose among
many different options.
MRP is most appropriate when the manufacturing environment
is complex and uncertain.

Purpose of MRP
Control inventory levels

Assign operating priorities

Plan capacity to load the production
system

MRP Structure

MRP INPUTS

The Master Production Schedule

MPS is prepared based on actual customers orders
and predicted demand. This schedule indicates
exactly when each ordered item will be produced to
meet the firm and predicted demand; that is, it is a
time-phased production plan.

MPS Example Awesome Speaker Specialist

Gross Requirements for Speaker

As shown on top this Master Production Schedule shows

planned output for end item speaker. The schedule indicate that
50 units needs on 6th week, 100 unit needs on 8th week, 47
units needs on 9th week and so on.
The quantities in a master schedule come from a number of
different sources, including customer order, forecasts and other
from warehouse to build up seasonal inventories.

Bill of Material (BOM)

For each item in the MPS, a bill of material exists.
The BOM file indicates all the raw materials,
components, subassemblies and required to produce
an item. The MRP computer system accesses the
BOM file to determine exactly what items, and in
what quantities, are required to complete an order for
a given item.

BOM Example

BOM Example (cont.)

Quantity on dependent parts to built the independent part (A)

If there is On-Hand Inventory: B=10 & C= 20 (Example)

The Inventory Records

It contains detailed information regarding the
number of quantity of each item on hand, on order,
and committed to use in various time periods. The
MRP computer system accesses the IR computer file
to determine the quantity available for use in a given
time period and, if enough are available to meet the
order needs, commits these for use during the time
period by updating the inventory record. If sufficient
items, as well as the usual lot size, on the planned
order release report.

AMIN SHAFANEJAD

MRP Processing:
Gross Requirement: The total expected demand for an item or raw material
during each time period without regard to the amount on hand.
Schedule Receipt: Existing orders that arrive at beginning of period.
Projected on Hand: Inventory balance that will be on hand at the beginning of
each time period.
Net Requirement: The actual amount needed in each time period.
Planned-order Receipts: The quantity expected to be received by the
beginning of the period.
Planned-order Release: Indicate a plan amount to order in each time period or
offset by lead time.

Gross Requirements Plan

Week
1

A.

Required date
Order release date

B.

Required date
Order release date

C.

Required date
Order release date

E.

Required date
Order release date

F.

Required date
Order release date

G.

Required date
Order release date

G.

Required date
Order release date

Lead Time
50
100

100
150
200

300

200

300

300
600
300

600
300

300

200

200

150

50

1 week
2 weeks
1 week
2 weeks
3 weeks
1 week
2 weeks

Determining Gross Requirements

Starts with a production schedule for the end item 50
units of Item A in week 8
Using the lead time for the item, determine the week in
which the order should be released a 1 week lead time
means the order for 50 units should be released in week 7
This step is often called lead time offset or time
phasing
From the BOM, every Item A requires 2 Item Bs 100
Item Bs are required in week 7 to satisfy the order release
for Item A

Determining Gross Requirements (cont.)

The lead time for the Item B is 2 weeks release an order
for 100 units of Item B in week 5
The timing and quantity for component requirements are
determined by the order release of the parent(s)
The process continues through the entire BOM one level
at a time often called explosion
By processing the BOM by level, items with multiple
parents are only processed once, saving time and
resources and reducing confusion
Low-level coding ensures that each item appears at only
one level in the BOM

Net Requirements Plan

The logic of net requirements
Gross
+ Allocations
requirements
Total requirements

On + Scheduled
hand
receipts
Available inventory

Net
requirements

Net Requirements Plan

Net Requirements Plan (cont.)

Determining Net Requirements

Starts with a production schedule for the end item 50 units of
Item A in week 8
Because there are 10 Item As on hand, only 40 are actually
required (net requirement) = (gross requirement - on- hand
inventory)
The planned order receipt for Item A in week 8 is 40 units 40
= 50 10
Following the lead time offset procedure, the planned order
release for Item A is now 40 units in week 7

Determining Net Requirements (cont.)

The gross requirement for Item B is now 80 units in week 7
There are 15 units of Item B on hand, so the net requirement is
65 units in week 7
A planned order receipt of 65 units in week 7 generates a
planned order release of 65 units in week 5
A planned order receipt of 65 units in week 7 generates a
planned order release of 65 units in week 5
The on-hand inventory record for Item B is updated to reflect
the use of the 15 items in inventory and shows no on-hand
inventory in week 8
This is referred to as the Gross-to-Net calculation and is the
third basic function of the MRP process

Updating the MRP system

The two basic systems used to update MRP
records are:
Regenerative system: Approach that
updates MRP records periodically
Net change system: approach that updates
records continuously

AHMED FAISAL

Lot Sizing
the process of modifying the net requirement quantities before
they are translated into planned orders in an MRP system.
If net requirements were translated directly into planned orders,
it would result in manufacturing component schedules and
purchasing schedules that did not take any account of the cost
of machine setups or the cost of ordering.

Lot Sizing Techniques

1. Lot for Lot
It is called DOQ (Discrete Order Quantity), and is a method for
lot sizing, where the net requirements occurring for each period
are the quantity of order. This method is often used mainly for
expensive items and the items whose demand occurs
intermittently. In this case the quantity is the same as that of the
case in which one period is specified in the fixed period
requirements.

 Example:
The company that makes a table want to ship 100 units at the beginning of the
day 4,150 units at the beginning of day 5, and 200 units at the beginning of
day 7, receipts of 100 wood sections are scheduled at the beginning of day 2.
On hand balance: braces = 60 and legs = 120.lead times in days for all items
are shown as table below, the product structure also show as table below:
FIND: prepare a material requirements plan using lot for lot ordering for all
items.
Quantity

Lead time

1-200

201-550

551-999

 Example cont.

Example cont.
Master
Schedule for
table

Day

Table

100

150

200

Beg inv

100

100

0
100
100
150

150

0
150
150

200

200

0
200
200

Beg inv

100
100

400

200

100
100
100

300

0
300
300
400

400

0
400
400

Table
Lot size : Lot for lot
Gross requierment
Scheduled reciepts
Projected on hand
Net requierment
Planned-order-reciepts
Planned-order-releases
Wood section (2)
Lot size : Lot for lot
Gross requierment
Scheduled reciepts
Projected on hand
Net requierment
Planned-order-reciepts
Planned-order-releases

Example cont.
Braces (3)
Lot size : Lot for lot
Gross requierment
Scheduled reciepts
Projected on hand
Net requierment
Planned-order-reciepts
Planned-order-releases

Legs(4)
Lot size : Lot for lot
Gross requierment
Scheduled reciepts
Projected on hand
Net requierment
Planned-order-reciepts
Planned-order-releases

Beg inv

60

60

100
60

240

300

60
240
240
450

450

0
450
450
600

600

0
600
600

Beg inv

120

120

880

120

400

120
280
280
800

600

0
600
600

800

0
800
800

Lot Sizing Techniques (cont.)

2. Economic Order Quantity (EOQ) Model
The economic order quantity (EOQ) is the order
quantity that minimizes total holding and ordering costs
for the year. Even if all the assumptions dont hold
exactly, the EOQ gives us a good indication of whether
or not current order quantities are reasonable

Lot Sizing Techniques (cont.)

3. Fixed Period Ordering System
It is an inventory control method where orders are periodically placed, but the
order quantity is different every time, and is also called Fixed Period Deficit
Ordering System. The method has the following features:
* An order is periodically placed.
* The order quantity is different every time.
* Even relatively large fluctuations in demand can be handled properly.
* Even seasonal variation can be handled modestly.
* The inventory volume can be reduced compared with ordering point system.
* A-group items are usually best for this method.
* Longer lead time is acceptable.
* Longer time for paperwork is needed.

HUSSEIN KADHIM SHARAF

MRP OUTPUT

Primary reports

Secondary reports

Safety Stock

Benefits of MRP

Backflushing

Exploding an end items to

determine the quantities of the
component that were used to
make item

Requirements of MRP

Thank You

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